The erstwhile Tata Motors has been demerged into its passenger vehicle (PV) arm and commercial vehicle (CV) arm with effect from October 10, 2025, with books reflecting the demerger retrospectively from July 1, 2025. While the PV arm has been named Tata Motors Passenger Vehicles, the CV arm has been christened Tata Motors. On October 14, 2025, when stock of the erstwhile Tata Motors (which now reflects only the PV arm) traded to reflect the demerger for the first time, the implied price of the CV arm worked out to ₹260. Further, when shares of the hived off CV arm (current Tata Motors) were listed on November 12, they opened at ₹335, indicating value unlocked.

Since then, Tata Motors’ shares have seen a one-way ride up to their last traded price of ₹484, reflecting the boom in business post GST 2.0 (though on a low base). The stock trades at 28 times the expected EPS for FY27 and at this valuation, it largely prices in the tailwinds listed under ‘Outlook’. On a trailing 12-month basis, it trades at about 30 times earnings, adjusted for one-offs. Peer Ashok Leyland trades at a P/E ratio of 34x. Adding the value of Tata Motors’ stake in Tata Capital at a 20 per cent holding company discount, the estimated price, based on FY27 earnings, implies that any upside to the stock price could be limited. It also needs to be watched how the market takes the company’s €3.8-billion acquisition of Iveco Group, once it is completed.

Given the long-term growth story for India’s CV market is still intact, the valuation appears to balance risks and rewards. While long-term investors can continue to hold the stock, others need not buy the stock at current levels.

Business, financials

Tata Motors manufactures and sells commercial vehicles of all sizes — from light/ small commercial vehicles (SCVs) to heavy commercial vehicles (HCVs). HCVs, ILMCVs (intermediate light-medium CVs), SCVs, passenger CVs (buses, vans) and exports make up 26 per cent, 17 per cent, 35 per cent, 12 per cent and 7 per cent of the total wholesale volume (based on 9M FY26). It has an overall market share of roughly 35 per cent in India’s CV market.

Post-Covid, the CV market has not grown. It is yet to surpass domestic wholesales of about 10 lakh units recorded in FY19. In FY25, CV firms sold about 9.6 lakh units. Between FY22 and FY25, Tata Motors volume (domestic + exports) barely grew, at a CAGR of 2 per cent, to 3.85 lakh units in FY25. For context, in FY19, the company sold about 4.7 lakh units in India. However, financially speaking, its revenue has compounded 13 per cent between FY22 and FY25 to ₹75,400 crore; the company, which incurred a loss before tax (before exceptional items) of ₹133 crore in FY22, has made profit before tax (before exceptional items) of about ₹6,400 crore by FY25.

In 9M FY26, Tata Motors’ wholesale volume has grown 9 per cent year on year, largely due to the boom in Q3 FY26, caused by broad-based higher consumption activity post GST rationalisation. Volume in H1 FY26 grew 3 per cent, while it grew 20 per cent in Q3 FY26. Revenue grew 6 per cent and profit before tax (before exceptional items) grew 27 per cent in 9M FY26. Exceptional items such as the impact of the labour code, de-merger costs and marked-to-market losses from investment in Tata Capital amounting to ₹3,400 crore brought profit before tax of ₹5,400 crore to a net profit of ₹1,236 crore. RoCE stood at 53 per cent and debt-to-equity ratio at 0.8x. The business is free cash flow (FCF) positive with FCF accretion of ₹5,169 crore in 9M FY26.

Outlook

The outlook for the CV segment appears upbeat. There is a good revival in volume post GST 2.0, and it is highly likely that CV wholesales would surpass that of FY19 in FY26. The management expects the momentum to continue and here are some factors (tailwinds) driving its judgment. One, GST on CVs has been cut from 28 per cent to 18 per cent, bringing down the initial cost (including insurance among others) and EMIs for operators. Two, GST rate rationalisation has given a boost to consumption, which needs to be supported by logistics. A spike in demand for logistics has meant higher profitability for operators, as many have undertaken 2-5 per cent freight hikes. Per data available with the company, HCV fleet utilisation has reached 80 per cent.

Three, lower delinquencies for financiers and lower interest rates for operators should encourage financing for purchases. Four, the government’s push towards infrastructure capex continues into FY27 as well. Five, there is a trend of State transport undertakings replacing old buses with new ones.

Per a conclave of analysts held by SIAM (Society of Indian Automobile Manufacturers), the CV market is expected to grow 4-6 per cent in FY27, and this has formed the basis for our estimates. With 17 new models launched this quarter, Tata Motors’ market share could grow to about 37 per cent or higher. Driven by strong demand from the West Asia, North Africa, Sri Lanka and the SAARC area, management expects double-digit export volume growth in FY27.

However, rising cost of inputs – especially precious metals (platinum, palladium) followed by copper and steel could dent margin. It remains to be seen if the 1 per cent price hike undertaken in January would protect the margin.

Iveco acquisition

Tata motors will be acquiring Italy-based CV major Iveco Group (excluding its defence business — thus acquiring the segments of a) Industrials: truck, bus, powertrain and b) Financial Services for about ₹38,000 crore. The industrials segment constitutes 89 per cent of revenue. The deal done at an EV/EBITDA multiple of about 2.5x is expected to be financed largely by debt. The same multiple for Tata Motors currently is 18x (adjusted for one-offs).

The acquisition will make Tata Motors the fourth-largest OEM of trucks weighing above 6 tonnes and will take its combined revenue to about ₹2.2 lakh crore. The deal is still work-in-progress and is expected to be completed by Q1 FY27. Currently, our analysis does not take into account Iveco’s numbers, and we will follow up with a note, once the deal is consummated. However, here’s a sneak peek.

Iveco predominantly operates in the European and South American markets. This is one of the reasons for the deal as it complements Tata Motors’ current export markets. However, except for buses and some segments such as LCVs in South America, the industry volume in the rest of the markets hasn’t grown in 2025.

In CY25, Iveco Group sold 1.4 lakh units, a fall of 13 per cent over CY24. Revenue for the year (ex-defence) fell 7 per cent to €13.4 billion (about ₹1.4 lakh crore) and adjusted EBIT margin (Industrials) declined to 4 per cent from 5.4 per cent in 2024. Tata Motors’ EBIT margin for 9M FY26 is 10 per cent and thus, the acquisition will be margin-dilutive. Unlike in 2024, Iveco Group’s Industrials vertical turned FCF negative in 2025, largely suggesting that the acquisition may not pay for itself and has to be supported by current FCFs of Tata Motors.

Published on February 15, 2026